Aura Minerals Inc. struggling to find support

Jun 29th, 2011 – 1 Comment

ORA is definately oversold and at some point it will make the turn to the upside.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Hi Lou,

Could you comment on Aura Minerals. It seems to be dropping out of the sky at the moment.

Would it be a good time to buy in ?

Thanks,

Jim

 

Hi Jim,

You have been bottom fishing Aura Minerals Inc. (ORA TSX) since your last request for an opinion back on April 13, 2011. At the time it was identified that there was a double bottom that formed at $2.53 which as a trend reversal pattern suggested a lift was possible. The stock moved to $3.10 by May o1, 2011 for a 22% gain but that was all the gas left in the tank. Since then it has been a sorry tale of woe as ORA has continued to sell off.

Lets consult the charts to see if the selling  has abated and set the stage  for an upside.

The three year chart clearly illustrates a stock that has lost investor confidence and has not been able to hold onto support at various levels. The decline that started in May accelerated as the company reported Q1 results on June 14 that missed expectations.

Some of the factors that led to the decline included heavy rain fall in Brazil and dedicated waste stripping at the Sao Francisco mine. Long term these are not chronic conditions but in a downtrend they just add fuel to the fire.

The six month chart depicts the double bottom identified in the April report and the run to resistance at $3.00. Unfortunately the uptrend was not sustained as investor enthusiasm dissipated. The shares were not  able to break above the 50 day moving average through May and early June. Finally the Q1 results increased the selling that has taken the stock below $2.00.

Calling an absolute bottom or an absolute top is a very difficult undertaking. The best strategy is to get in late and leave early. Yes you will leave some money on the table but it also reduces the risks associated with having your money in the market.

Given your interest it seems you want to be a buyer so lets make sure you are aware of the period of seasonal strength for precious metals stocks that begins in mid July and runs until October.ORA is  definitely oversold and at some point it will make the turn to the upside. Maintain your surveillance on the MACD for a signal that momentum has shifted to the buy side.

 In addition keep an eye on volume. The average daily volume for ORA over the last three months has been 834,405. Not once in the last 30 days of trading has volume exceeded that level. A stock can’t go up without investors willing to bid up the stock. Finally watch for resistance levels at $2.20 and $2.60.

Make it a profitable day and happy capitalism!

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